The White House indicated this week that President Donald Trump is "considering" the removal of Federal Reserve Board Governor Lisa Cook. This move reignites termination proceedings against the Biden-appointed official, following a temporary block by the U.S. Supreme Court in June.
A separate report revealed that Trump has held multiple phone calls with Fed Chair Kevin Warsh since his Senate confirmation in May. The Federal Reserve's independence is facing an unprecedented test.
White House Deputy Chief of Staff Dan Scavino sent a letter to Cook on Wednesday, citing "good reason to believe" she made false statements on one or more mortgage loan agreements. The accusation mirrors the rationale Trump and his allies used when they first attempted to fire Cook last year. Cook has denied the allegations and filed a lawsuit over the dismissal. A federal court blocked Trump's decision during the legal proceedings. In late June, the U.S. Supreme Court upheld that ruling by a 5-4 vote, rejecting the Trump administration's request to "stay the lower court's order." This decision was seen as defending the Fed's cherished independence during an unprecedented challenge. However, Chief Justice John Roberts noted that the court's ruling did not prevent Trump from again attempting to fire Cook over the mortgage fraud allegations. Roberts stated that any new termination attempt would require additional steps to protect Cook's constitutional due process rights.
Scavino stated he sent the letter on Wednesday "in accordance with the Supreme Court's opinion" and demanded Cook submit an explanation and related evidence within three weeks. Cook's attorney, Abe Lowell, immediately issued a statement, calling the allegations "as baseless as when President Trump tried to fire Cook and interfere with the Fed's independence a year ago." Lowell emphasized: "Regardless of the President's next move, the facts and Supreme Court precedent are clear—there is no legal justification for removing Governor Cook. We will challenge this latest pretext, just as we did before, to defend her position and the historic role of the Federal Reserve."
Cook, appointed by former President Joe Biden in 2022, holds a term expiring in 2038. Trump's initial attempt to fire Cook coincided with his escalating pressure on the Fed to cut interest rates sharply. Market observers widely fear this could set a dangerous precedent, exposing monetary policy decisions to greater political interference. Notably, no U.S. President has ever successfully removed a Federal Reserve Governor since the institution's founding in 1913.
Simultaneously, the frequent private calls between Trump and Fed Chair Kevin Warsh are sparking fresh concerns about the central bank's independence. Media reported Wednesday that the two have spoken multiple times since Warsh's Senate confirmation in May. Their discussions have covered topics ranging from the economic impact of the Iran war to the rapid rise of artificial intelligence. This communication pattern breaks with the recent tradition of formal, limited contact between a president and the Fed chair. It remains unclear whether they discussed monetary policy, but Trump has long called for the Fed to cut rates sharply. Trump's push to influence monetary policy represents the most aggressive intervention in central bank decision-making in decades.
Friday's U.S. non-farm payroll data came in weaker than expected, reducing market bets on the Fed tightening monetary policy. Traders now see roughly a 40% probability of the Fed raising rates next month, down significantly from about 60% before the report's release.
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